Netflix: Leveraging Big Data to Predict Entertainment Hits

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Case Details:

Case Code : ITSY075
Case Length : 18 Pages
Period : 2009-2013
Organization: Netflix
Pub Date : 2013
Teaching Note : Not Available
Industry : Service/ DVD rental/ Online video streaming services
Countries : US; Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Netflix was started in 1997. In 1999, the company introduced a DVD subscription service, providing unlimited rentals on a monthly subscription basis. In 2000, it introduced the personalized movie recommendation mechanism that employed subscribers' ratings to forecast the preferences of all Netflix subscribers. Toward the close of 2007, Netflix was shipping around 1.6 million DVDs on a daily basis. In 2007, the company also launched its video streaming services in the US, and, in 2010, began the global expansion of this business. As of March 2013, Netflix, Inc. functioned in three categories: Domestic Streaming, International Streaming, and Domestic DVD

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The Domestic DVD business provided DVDs-by-mail subscription services in the US. Under the streaming services, Netflix provided an Internet television network service that allowed subscribers to stream TV programs and films directly on TVs, computers, and mobile gadgets in the US and globally.

As of December 31, 2012, Netflix had 27.15 million subscribers for its streaming service in USA. Subscribers in other parts of the world totaled 6.12 million. The subscribers to Netflix's mail order business totaled 8.22 million. As of November 2012, Netflix accounted for 33% of the peak period video streaming traffic in North America. As of March 2013, the company's subscribers in nearly 40 nations were viewing close to 1 billion hours of TV shows and movies on a monthly basis.

As of March 2013, Netflix was charging US$ 7.99 per month from each of its video streaming subscribers in USA. For the year ended December 31, 2012, Netflix had generated revenues of US$3,609.3 million and net income of US$17.1 million (Refer to Exhibit I for Netflix's financial performance from 2005 to 2012).

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